[Update] Square Enix Reports ¥1.6 Billion In Extraordinary Loss

Update: Square Enix has replied to our request for clarification on Murdered: Soul Suspect. "Murdered: Soul Suspect remains on track for a 2014 release," a representative told us. "We have not announced a specific launch date yet. The list at the link below only includes titles shipping through March 2014."

Square Enix has reported its financial performance for this fiscal year's first quarter. The company has improved year-over-year, but is still reporting a significant net loss.

In the most recent quarter, Square Enix lost ¥493 million ($5.02 million) compared to a net loss of ¥2.077 billion ($21 million) in the first quarter of 2012. This quarter's performance was driven by an extraordinary loss (caused by a non-recurring, but significant event) in the amount of ¥1.6 billion ($16 million).

Square Enix has written off this amount due to a change in development policy resulting from the promised review of in-progress games. We have heard from the company recently that it will be shifting toward mobile and social, and narrative content of the financial report reinforces this. The loss seems to align with cancelations.

Square Enix cites the console game markets in North America and Europe as "increasingly competitive and oligopolistic." The publisher is focusing on new revenue streams, and has decided to report its forecast as a range rather than provide specific targets. This conveys significant uncertainty.

Square Enix is coming off an extremely challenging fiscal year, and new president of Europe and the Americas Phil Rogers recently issued a blog post attempting to reassure fans about the company's direction.

Additionally, in the company's list of announced games, there is no mention of Murdered: Soul Suspect. The current-generation title is slated for 2014, but is absent from the company's list of titles already revealed. We've reached out to Square Enix for clarification.

Saints Row IV appears on the list, as Koch Media/Deep Silver have a distribution arrangement. Square Enix is responsible for handling retail placement.

Our TakeThe extraordinary loss from an overhaul of in-progress games might not be a bad thing. If expected underperformers were cut, the company saved money and embarrassment by curtailing development. It seems that new president Yosuke Matsude has decided not to throw good money after bad.

However, if the end result is a dramatic shift to mobile away from console development, especially in the West, things aren't going to get better. Deus Ex: The Fall was absolutely terrible, and the company has been pushing out obscenely priced mobile remakes of now-ancient games.

We know that Square Enix in particular is guilty of ballooning development budgets (just look at the absurd sales expectations for its most recent games developed in the West). Studios need to start doing the same (or more) with less, and hopefully the x86 architectures of the next-generation consoles allow that to become a reality.

As for the statement about the console market in the west becoming "increasingly competitive and oligopolistic" in terms of consoles, I can agree with the former, but not the latter. The console landscape has broadened a bit with the stumbling first steps of budget-priced living room hardware, and indie development is thriving, pushing content (and platform holders) in new, broader directions.

There are more players now (though some aren't terribly competitive), and while the software market is crowded right now, things are going to reset come this fall. Anyone who has been through a console transition knows how slim the libraries are for the first six to nine months.